Make sure you get paid by using a Statutory Demand

A problem encountered by many construction clients over recent months has been how to deal with unpaid invoices.

The option many think of first is to sue but having an unpaid invoice is no guarantee that a Judge will decide the case in your favour.

At the very least, you will need to prove that the work you have done is within the agreed scope of works, within the agreed price and to the agreed standard. This can lead to long drawn out disputes, particularly if all of the terms of your contract have not been put in writing.

With this in mind, issuing a Statutory Demand can often be a more attractive option. This is a written demand for payment of a debt above £750 which is served in person at the debtor’s home or in the case of a company, at the debtor’s registered office.

If after 21 days the debt has not been disputed or paid you will be entitled to issue proceedings to make the debtor bankrupt, in the case of an individual, or insolvent, if a company. You do not have to go on to issue those proceedings but the benefit is that the recipient will not know whether your threat is an idle one.

On the other hand, when you issue court proceedings the stakes are high as if you lose you will have to pay your own costs and most of your opponent’s as well.

In small claims, less than £5,000, costs cannot be recovered, save in very rare circumstances where one of the parties has behaved extremely unreasonably. This is why parties often deal with small claims themselves. If you win, you recover your claim and if you lose, you simply lose the time you have put into your case.

The fact that your claim is for less than £5,000, however, is not a guarantee that it will be dealt with as a small claim. Your opponent may defend your claim and issue a counterclaim for more than £5,000 which will take the dispute above the small claims limit. Alternatively, the Judge may decide that even though the dispute is for less than £5,000, its complexity means that it should not be dealt with under the simplified small claims process.

The cost of preparing and serving a Statutory Demand is usually around £250, plus a service fee of around £65, and although not recoverable is an excellent way of concentrating the mind of the debtor to take its liability seriously and even if it cannot pay in a lump sum, to come to some arrangement with the creditor within the 21 days allowed.

For more information contact John Dunham, Principal Legal Executive, or Patrick Cooney, Solicitor, on 01223 461155.